Why banks are holding on to physical branches

As a tech-savvy individual, at least when it comes to mobile banking, you might be the perfect example of the returns banks are reaping from their investments in technology.

You are among the everyday retail customers who have probably not set foot in a bank branch in the last decade.

From checking balances and transferring money to applying for and securing loans, nearly every service is available at the tap of a screen, all from the comfort of your bed on a lazy Sunday morning or a holiday while you doom-scroll through TikTok.

Yet despite the billions invested in technology-enabled banking, the need for face-to-face interaction between banks and their customers remains.

The latest Central Bank of Kenya (CBK) Bank Supervision Annual Report shows that even as lenders embrace digital channels and scale back their reliance on traditional banking infrastructure, the physical branch and the human workforce remain central to their operations.

Why is this the case in an era when a smartphone can function as a bank?

CBK notes that there are still growth areas in the country where physical branches are needed.

“The increase in bank branches is mainly attributed to the opening of new branches by some commercial banks in emerging growth areas,” says CBK in the report analysing the performance of the banking business in 2025.

According to the report, the number of bank branches increased from 1,573 in 2024 to 1,611 in 2025, an increase of 38 branches (2.4 per cent).

Nairobi County recorded the largest increase in the number of branches, with seven more. A total of 20 counties registered an increase of 42 bank branches, while four counties recorded a decrease of four bank branches.

“In 23 counties, there was no change in bank branches,” the report says.

Over the past 15 years, a period of rapid technological adoption in the banking industry to counter the entry of digital credit providers (DCPs), the number of branches has grown by 51.6 per cent, from 1,063 in 2010 to the current 1,611.

Similarly, the number of staff in the industry has grown by 42.6 per cent, from 28,846 in 2010 to 41,124 in 2025.

This growth in the number of staff matches the increase in deposit accounts, which now stands at 80.7 million compared to 2010 when it was 11.9 million.

The interesting aspect of the increase in staff in the sector is that banks are hiring more employees who interact with customers directly compared with other categories.

“Clerical, secretarial and other staff cadres increased by 2,588 and 223, respectively. Medium peer group banks had the largest increase in the total number of staff,” the report says.

According to the report, employment in the management level dropped 1.8 per cent in 2025 from 12,407 to 12,183. The supervisory level also dropped to 8,722 from 9,025 during the period, a drop of 3.4 per cent.

However, clerical and secretarial positions increased by 21.3 and 4.3 per cent, respectively. The number of clerical staff, on the other hand, went up by 2,588 to 14,757, while secretarial and other staff increased by 223 to 5,462.

Regional expansion is also another reason why the number of staff is increasing.

The report says the subsidiaries of Kenyan banks had a combined employee count of 13,258 as at December 2025, an increase of 3.5 per cent compared with 12,811 in 2024.

"The growth was primarily driven by Equity Group Holdings Plc's operations in Uganda and the Democratic Republic of Congo (DRC)," the report says.

"The employee count in subsidiaries shows that DRC had the highest number of employees at 4,032 as at December 2025, compared with 3,754 in 2024. DRC accounted for 30.4 per cent of the total number of employees and the largest proportion of subsidiaries and branches in the region."

When banks did not have physical branches across the country, the use of agents became the norm, and financial institutions embraced this model.

However, as technology takes hold of the banking business, even agency transactions are taking a hit. Nevertheless, they remain a major component of the banking business and the closest form of face-to-face interaction.

According to the report, all major transactions, including cash withdrawals and deposits, slowed in 2025. The number of cash deposit transactions by agents fell to 55.6 million, compared with 67.2 million in 2024.

Cash withdrawals also declined to 30.1 million, down from 38.9 million in 2024.

The report says the number of banking transactions undertaken through bank agents decreased by 20.2 per cent, from approximately 142.3 million recorded in 2024 to 113.5 million in December 2025.

“The decrease in total transactions was mainly as a result of decreases in transactions relating to cash deposits, cash withdrawals, account balance enquiries, mini statement requests, and payment of retirement and social benefits,” the report explains.

It adds: “The decrease was attributed to an increase in competition from other competing transaction channels such as mobile money and internet banking.”

Nevertheless, the number of agents increased from 89,167 to 93,341, emphasising their importance in helping banks reach out to customers.

The report further shows that the number of automated teller machines (ATMs), while having increased by 12.6 per cent in the last 15 years, dropped in 2025 when compared to 2024, indicating how banking is now being conducted online through self-service portals.

In 2010, there were 1,979 ATMs, a figure that closed 2025 at 2,228. This was, however, a drop of 2.7 per cent when compared to 2024 figures.

“The number of Automated Teller Machines decreased by 61 (2.66 per cent) to 2,228 in December 2025, from 2,289 in December 2024,” the report says, explaining that one of the reasons is because some banks are finding the model rather expensive.